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It is being anticipated that post July
1 Joe Corona USA
Jersey , 2017, homebuyers will pay a uniform rate on their purchase under
the Goods and Services Tax (GST) regime. Experts feel that the move will bring
down property prices in the country. While buying a house may or may not become
cheaper, living in a gated society is surely going to burn a big hole in your
pocket in the coming months, courtesy GST.
Magicbricks explains why living in
a housing society is set to get costlier.
Higher maintenance charges
If
you stay in a housing society where your monthly maintenance charges are in
excess of Rs 5,000 then brace up to shell out GST at 18%. Although the existing
rate stands at 15.55%, which includes 15% service tax, 0.5% Swachh Bharat cess
and 0.05% non-agriculture tax, the change post-GST will lead to an additional
burden of 2.5% on residents.
“In the GST era, it appears that any
unregistered dealer purchase made by any cooperative housing society (CHS) will
attract GST on reverse charge mechanism (RCM) basis. This means that the
liability to pay tax is cast upon the receiver and not the
seller Jesse
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Director, RSM Astute Consulting Group. He adds that expenses such as legal fees,
security expenses, transport charges, labour charges might attract GST on RCM
irrespective of whether the CHS billing exceeds Rs 20 lakh or not in the
previous year. “Housing societies are not business entities. It is unfair on the
part of the government to levy taxes,” says Rajesh Tandon, a housing activist in
West Delhi’s Vikaspuri area. This major issue requires a serious rethinking on
the part of the government.
Property tax not subsumed
The government has
not subsumed the property tax in the new tax regime. This means that a property
owner will continue to pay property tax on a yearly basis as per the state law
concerned apart from the GST. There cannot be GST on property tax since, there
cannot be double taxation under GST.
Additional charges
Apart from the
annual maintenance
charges Jermaine
Jones USA Jersey , utility bills such as water charges too, will be taxed
under a separate head in the new tax regime. “CHS does not act as a supplier of
services of water or power supply and, thus, it would not attract GST,” says
Satish. But, like in the past, residents would have to pay tax on water and
power usage.
But KPMG partner (Indirect taxes) Priyajit Ghosh differs on this
aspect. He says, “While electricity usage has been kept out of the purview of
GST, water charges will attract concessional GST rate.”
“RWAs will now have
to tweak their maintenance bill heads wherein multiple heads will have to be
generated to show levies directly being paid by the society. This will help in
lowering the balance maintenance amount on the basis of which GST would be
calculated Independence
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Repair work
to cost dearer
In case a housing society carries out maintenance or
renovation work and buys commodities such as cement, paint or steel, it can get
deducted the tax paid on the purchase of these commodities from the total amount
paid under GST. “But this is only possible if the concerned Residents’ Welfare
Association makes full use of the input tax credit as the repair fund will
attract 18% tax,” says Chahal.
Housing societies with a bigger purse to be
hit
Housing societies that have an annual corpus of over Rs 20 lakh will have
to compulsorily take registration in the GST era. Even if a housing society’s
monthly maintenance charge is less than Rs 5,000 per flat, if its membership
base is large and the annual collection is in excess of Rs 20 lakh, it would be
liable to pay GST. “But in case the total billing is more than Rs 20 lakh but
less than Rs 75 lakh, the CHS may prefer to opt for the composition scheme,”
says Satish.
“The other
way Gyasi Zardes
USA Jersey , if possible, is to split the buildings of a big housing
society to form separate societies so the collection amount stays within Rs 20
lakh,” says Chahal.
He further adds that the current tax exemption of Rs
5,000 per member per month may not be applicable in the GST era since the
billing in totality for the CHS will be taken into account. “Overall, GST shall
be a big disappointment from a CHS point of view,” Satish sums up.
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